It did not take long for Citigroup’s former star energy trader to give the investors who poured more than $1 billion into his new hedge fund a reason to feel some buyer’s remorse.
Astenbeck Capital Management, run by Phibro chief Andrew Hall, saw its commodity hedge fund lose more than 10% last month, wiping out its year-to-date gains. The fund, which raised $1.08 billion over the past two years from 37 investors and features a hefty $25 million minimum investment requirement, is now down by slightly less than 10% year-to-date.
Westport, Conn.-based Astenbeck was burned by bullish bets on commodity producers and energy investments, The Wall Street Journal reports.
“Unfortunately, we did not dodge the onslaught,” Hall wrote to investors on June 1. “We did reduce risk but not fast enough. We did hedge but not well enough. And we did re-enter some markets that we had exited, prematurely, as it turned out.”
Hall and Phibro’s new owners, Occidental Petroleum, set up Astenbeck earlier this year. The new firm manages outside capital, while Phibro, which Occidental bought last year from Citigroup, manages Occidental’s money exclusively.
Despite the setback, Hall said he remains bullish about energy prices and rejected that the world is “on the eve of another 2008 Lehman event,” although he has cut Astenbeck’s “overall risk exposures.”
With offshore drilling becoming increasingly important, the BP Gulf of Mexico disaster will push costs “significantly higher due to more stringent safety measures.”
“This will remove oil from the market and also as importantly raise the price hurdle for future investments,” Hall wrote.